Marvin E. Blum, Individually and on Behalf of All Otherminority Shareholders of Bankatlantic, Plaintiff-appellee,elliot Borkson, et al., Intervenors, v. Bankatlantic Financial Corp., Alan B. Levan, Jack Abdo,defendants-appellants, 925 F.2d 1357 (11th Cir. 1991)

Appellants, BankAtlantic Financial Corporation, Alan B. Levan, and Jack Abdo (collectively "BAFCO"), challenge the district court's order denying their motion to require additional notice to class members. Also at issue is the court's jurisdiction over the appeal. Concluding that appellants have not met the requirement for establishing appealability of the district court's collateral order, we hold that we do not have jurisdiction over this appeal.

Marvin E. Blum, as representative of a class of plaintiffs, filed this action against BAFCO alleging violations of the Securities Exchange Act of 1934 and breach of contract under state law. On September 13, 1988 the district court certified the class action under Rule 23(b) (3) of the Federal Rules of Civil Procedure,¹  defining the class as " [a]ll persons, other than Defendants, and their affiliates, officers and members of their immediate family who owned shares of BankAtlantic common stock on February 6, 1988, or their successors in interest." The court also established the notice procedure as follows:

Counsel for the class shall submit to the Court, within twenty (20) days hereof, after conferring with defense counsel, a proposed form of order which provides for the mailing of notice of the pendency of this litigation as a class action. Defendant shall promptly file a list of class members as defined herein, by name and address so that the mailing of the notice can be effectuated.

On November 16, 1988 the court approved the notice to the shareholders submitted by Blum. BAFCO did not object to the notice at that time, and even provided the names and addresses of shareholders to be notified. The parties understood that the shareholder list included some record holders;²  that is, that the owners of record held the stocks in "street name" for the beneficial owners.³  The notice also instructed the record owners to forward notices to the beneficial owners.

The notice mailed to the shareholders incorrectly stated that the exclusion form, which if returned would allow the potential class member to opt-out of the litigation, had to be returned by January 15, 1988, rather than 1989. Sometime in December 1988, Blum mailed a correction of this to the same list of shareholders. The mailing of the original notice also failed to include change of address or exclusion forms; this omission required a third mailing in December. The plaintiffs did not receive the approval of either the defendants or the court for these two subsequent addenda, and apparently the addenda did not instruct record owners to forward the documents to the beneficial owners.

On January 13, 1989, BAFCO moved that, inter alia, the exclusion period be extended and that a new notice be sent to clarify the confusion of the prior notices. At a hearing in February 1989, the defendants asserted that the notice addenda had not stated that the record owners should forward the addenda to the beneficial owners, and that a majority of the stock held by potential class members was actually held by these record owners in street name. BAFCO then requested a renotice of the class members, including "proper instructions to Cede and Company [a brokerage firm which owned a majority of shares in street name] as to how to get to those shareholders [the beneficial owners] and a sufficient length of time for those shareholders to opt out." BAFCO questioned whether the beneficial owners had received notice or the exclusion forms because none of the exclusions filed as of that date had been filed by beneficial owners. BAFCO did not present any other evidence that beneficial owners had not received notice.

At this hearing the plaintiffs asserted that they did not know that Cede and Company was a record owner, and that BAFCO, which had been ordered by the court to provide the list of shareholders, had not informed the plaintiffs that Cede and Company was a record owner. Recognizing that confusion existed regarding the notice, the court extended the exclusion period. It also requested that the parties design a new notice informing class members that if they had not signed an exclusion form, they could now do so. In addition, the court requested that the brokerage houses be informed that they should contact the beneficial owners. Finally, the court ordered that the defendants, BAFCO, inform the plaintiffs of any record owners on the shareholder list.

In March Blum filed a proposed renotice, to which BAFCO objected and proposed revisions in April. Appellants noted in their objection that there might be some difficulty in notifying the beneficial owners. They did not, however, move that these owners be notified directly, but rather suggested that the record owners be told to forward the notice and that the opt-out provision be altered into an opt-in provision which would require class members to request inclusion in the class. The district court found that the notice was sufficient and overruled the objection. The notice included a cover letter which instructed the record owners to forward the notice to the beneficial owners;⁴  this forwarding instruction was not challenged by the defendants.⁵ 

During the ensuing months statements were received from three brokerage houses. Two houses sent bills to the plaintiffs for reimbursement of their costs incurred from the mailing of notices. The third company, Thomson McKinnon Securities, Inc., sent a letter to the court listing the clients it determined to be eligible for the class; essentially, this was a list of the beneficial owners for whom Thompson McKinnon held BankAtlantic stock. The court, on August 29, ordered Blum to send a notice to these listed owners, which Blum did.

On November 8, 1989, BAFCO filed the motion presently under review, requesting, inter alia, that notice be mailed to every individual beneficial owner. BAFCO asserted that the Thomson McKinnon letter was evidence that the record owners were not sending notices to the beneficial owners. They provided no other evidence that beneficial owners were not notified.⁶  The district court denied this motion without opinion.

This court has "jurisdiction of appeals from all final decisions of the district courts of the United States...." 28 U.S.C. § 1291. Thus, a court of appeals usually does not have jurisdiction over interlocutory appeals that have not been certified by the district court. See Flinn v. Gordon, 775 F.2d 1551, 1552 (11th Cir. 1985), cert. denied, 476 U.S. 1116, 106 S. Ct. 1972, 90 L. Ed. 2d 656 (1986). The Supreme Court has provided an exception to this rule for decisions that, although not terminating the action, do "finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated." Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S. Ct. 1221, 1225-26, 93 L. Ed. 1528 (1949).

This circuit has elaborated upon the Cohen language by identifying three factors necessary to establish such an appealable collateral order: "(1) the substance of collateral orders must be independent and easily separable from the substance of other claims, (2) at least part of the question of collateralness is determined by the need to secure prompt review in order to protect important interests of any party, and (3) the finality issue is to be examined in light of practical, rather than narrowly technical, considerations." Diaz v. Southern Drilling Co., 427 F.2d 1118, 1123 (5th Cir.), cert. denied, 400 U.S. 878, 91 S. Ct. 118, 27 L. Ed. 2d 115 (1970).⁷  See also In re Nissan Motor Corp. Antitrust Litig., 552 F.2d 1088, 1094-95 (5th Cir. 1977).

The central issue on this appeal concerns the second element of the Cohen rule: review must be necessary to protect the important interests of a party.⁸  Determining what constitutes an important interest in the context of appeals of class notification orders requires careful study. The Supreme Court has found appealable some orders regarding notification methods. In Eisen v. Carlisle & Jaquelin, 417 U.S. 156, 172, 94 S. Ct. 2140, 2150, 40 L. Ed. 2d 732 (1974), the Court upheld jurisdiction under Cohen for the appeal of an order imposing 90% of the cost of the notice on the defendants. Although the Court was not applying the Diaz analysis, it appears that the possibility that one party would have to pay substantial costs without a guarantee of reimbursement made the issue too important to deny review. See Bennett v. Behring Corp., 629 F.2d 393, 395 (5th Cir. 1980). The Court subsequently has held an order allocating the expense of identification of the class to be appealable. Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 347 n. 8, 98 S. Ct. 2380, 2387 n. 8, 57 L. Ed. 2d 253 (1978). Appellants cite these Supreme Court cases to support the appealability of the district court's order in this case. Although the allocation of costs of identification does constitute an important interest of a party, that is not the specific issue before us. Indeed, Blum has not refused to pay for any part of the notice, and appellants have not asserted that the appellees have not paid the bills they received from two brokerage houses. Rather, appellants here challenge the adequacy of the notification method. Fortunately, our circuit has confronted this issue. In In re Nissan Motor Corp. Antitrust Litig., 552 F.2d 1088, 1095 (5th Cir. 1977) the court held that because the notice "probably omits substantial numbers of the certified class," an appeal should stand. In that case the class was defined as the original retail purchasers of Datsun vehicles from 1966 through 1973. The list used to identify the class members for notification came from a car company's list of current owners of vehicles, a list generated by computer and containing information since 1971. The list had been updated only when the company was informed of a sale of a used car or title registration change. An alternate source of names existed, because the original purchasers were listed on retail cards received from the dealers; compiling addresses from this list, however, would have required far more effort and expense. Nonetheless, the court reasoned that the computer list would omit a great number of people who had purchased the cars during that period but then transferred them to the current owners, and that those original owners, being members of the defined class, would not receive notice. The court stated that the settlement fund established in that case would be so depleted by the time of a final judgment that not enough money would remain for the plaintiffs even to notify the other class members. The court found this possibility to constitute an important interest of a party. In Bennett v. Behring Corp., 629 F.2d 393 (5th Cir. 1980), however, the court held that the allegation that the notice method might not reach all of the class members was not sufficient to meet this prong. There the class consisted of 8,500 property owners in a confined area, and the court found the mere possibility that some owners were temporary residents who might not have received a mailing was insufficient to meet the requirement of protecting important interests.⁹  629 F.2d at 395.

Thus the crux of this second prong, as applied to a class action notice challenge, is whether there is a significant likelihood that a substantial portion of the class members would not receive notice. Here appellants assert that 89% of the shares owned by class members are held in "street name" by the record owners. Because notice was sent to brokerage houses and not to the beneficial owners, it is possible, they contend, that these members have not received notice. To support this claim, they observe that one brokerage house, Thomson McKinnon, mailed to the court a list of the beneficial owners rather than forwarding notices itself. Appellants assert that this compels the conclusion that other brokerage houses have not forwarded notices and have not so informed the court. Appellants also refer us to a 1977 SEC study which found that brokerage houses might not forward class notices. See In re Franklin Nat'l Bank Sec. Litig., 574 F.2d 662, 669 (2d Cir. 1978).

As to the evidence of the returned list of beneficial owners submitted by Thomson McKinnon, the district court, upon receiving the list, instructed the plaintiffs to mail notices to those owners directly, which the plaintiffs did. There is no evidence that these beneficial owners did not receive notice, nor is there any evidence that other brokerage houses did not forward notices.

Appellants also claim that it is industry practice not to forward notices. Although this was apparently so in 1977 when the SEC conducted its study, appellants present no more recent evidence.¹⁰  BAFCO's reliance on this early study and older cases is particularly troubling in light of their conduct during the drafting of the various notices in this litigation. BAFCO twice approved the method of notification of the record owners with forwarding instructions. They approved the original notice which provided that the beneficial owners receive notice through the intermediaries, and which included forwarding instructions. Then, upon the renotice as required by the district court, BAFCO not only approved notice to the record owners, but actually included that method in their own proposed notice. Thus, in 1989, BAFCO had conceded that notice to the record owners was adequate under Rule 23(c) (2).¹¹ 

Had BAFCO believed that it was industry practice not to forward notices, they should have stated as much when the notices were drafted. They could have proposed alternate methods, such as requiring the record owners to submit lists of beneficial owners to the court or to submit postage receipts or other evidence of mailings. Indeed, appellants now assert that such methods are possible. BAFCO did not propose such options at the time of the notices, however, and they are now estopped, absent concrete evidence of harm, from claiming that the final notice order causes the irreparable harm to the interest of a party sufficient to establish appealability under Cohen. Cf. Bennett, 629 F.2d at 395 (Eisen and Nissan represented cases where one party claimed an irreparable harm from the class notice order; such harm was not present in this case).

Appellants argue that estoppel is not an issue because the burden of proving that class members received notice should lie with the class representative. Although that might be so in a case where the defendant initially challenges the notification method, it is not so here, where BAFCO supported the forwarding method. Because BAFCO initially approved of the notice forwarding instructions, it is their burden as appellants to prove that members did not receive notice. The mere suggestion that the Thomson McKinnon letter implies non-cooperation by some record owners, combined with references to evidence of earlier industry practice presented in other courts, is not sufficient for BAFCO to meet their burden of establishing the harm necessary for this court to protect an important interest of a party by interlocutory appeal.

We perceive little difference between this case and Bennett, in which the appellants presented the court with the mere possibility that some class members might not have received notice. Indeed, the primary distinction is that here the appellants had already agreed to the notice method, which, as we have stated, weighs against BAFCO. We therefore hold that the second prong of Cohen and Diaz is not satisfied, leaving us without jurisdiction to hear this case.

APPEAL DISMISSED.